Study favours Muskrat Falls over natural gas

The government ramped up its defence of the proposed Muskrat Falls hydroelectric project today, releasing several reports including one that rules out using natural gas to meet the province's energy needs.

The study concludes natural gas is a more expensive and less reliable option than the multibillion-dollar hydro project.

Natural Resources Minister Jerome Kennedy said the report outlines — again — why the PC government is taking a pass on natural gas.

"Nalcor did all this at Decision Gate 2," said Kennedy. "However, the critics said that's not enough. So we've responded with the reports."

The government concedes there is enough gas in the offshore to meet the island's energy needs, but claims the financial numbers just don't add up.

The study released today states the economics of building a pipeline to supply what is effectively a small and isolated market is not feasible.

In addition, the report points out the best source of natural gas to feed a pipeline is Husky's White Rose field, but that the company plans to liquefy that gas and sell it on the global market.

The study also concludes buying liquefied gas from elsewhere would be too expensive, especially during the winter when competition for supply is so fierce that it becomes an unreliable choice.

"In order to have security of supply, it’s going to have to be at world prices," said Kennedy. "So that's not a good or viable option."

In dollars and cents, the best liquefied natural gas options are at least $2.3-billion more expensive than Muskrat Falls, with the cheapest pipeline option more than $4-billion higher.

Nalcor CEO Ed Martin says the cost comparison demonstrates why Muskrat Falls is a better choice for the province.

"Our extensive analyses of supply alternatives show that the interconnected island option — specifically Muskrat Falls and the Labrador island link — is a less expensive option for consumers," he said.

Martin and Kennedy's Muskrat Falls pitch won't end with this report.

Still to come are reports on electricity rates and demand, as well as studies ruling out Gull Island as an immediate option and rejecting the notion of waiting for Upper Churchill power in 2041.

The province also promises to spell out the legal impediments to re-opening the original Churchill Deal, as well as the environmental benefits of replacing Holyrood with hydro.

Mining companies hear Dunderdale’s pitch

Meanwhile, Premier Kathy Dunderdale took her case to a roomful of mining executives, an audience that's already sold on Muskrat Falls.

The provincial government released two reports focusing on the role of mining in the economy, and the part Muskrat Falls could play in future mines.

Mining has exploded in Labrador over the last decade, and with a rush underway to develop mining projects there, the premier says the industry will need the power.

"It is a vital means of supplying the needed power," Dunderdale said.

"Existing generation capacity in Labrador will be exhausted by 2017," she added. "It will be the height of irresponsibility to let that happen."

In 2004, the province collected $14 million in mining taxes and royalties.

This year, that figure has grown to an estimated $270 million.

Some of the province's top mining executives publicly stood behind the Muskrat Falls project at Thursday's meeting.

"We support this project wholeheartedly, and it has our endorsement," said George Ogilvie, CEO at Rambler Metals and Mining.

Meanwhile, Dean Journeaux with New Millennium Iron says Muskrat Falls is necessary for his $5-billion project to go ahead.

"How could we guarantee an investment without power?" asked Journeaux. "We have to have the power for the project to exist, so it’s very simple -- no power, no project."

The premier may have an easier time selling the plan to mining companies than to her political opposition.

She's promising to open the house of assembly for a special debate no later than November 19.